Central bankers becoming 'unpredictable'

Taylee Lewis

— 1 minute read

18 June 2015

Investors are faced with less information and more uncertainty when it comes to predicting the actions of global central banks, says T Rowe Price.

In a recent article entitled, Are central banks becoming less predictable?, T Rowe Price argued that there is more dispersion between macroeconomic cycles and therefore greater divergence in fiscal and monetary policy.

As a result, report author and T Rowe Price head of international fixed income, Arif Husain, said investors need to rethink the way they think about central banks' actions.

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Mr Husain asked: “Do central banks continue with the QE experiment and negative interest rates? Does pre-emptive easing mean that central banks will do whatever it takes to avoid a crisis?

“Or are some central banks now just following the QE path adopted by some of the largest central banks in the world, and if it is good enough for some, then it is good enough for others?

“Quantitative easing, pre-emptive monetary actions, negative interest rate policies, and also less guidance, have all contributed to greater uncertainty in investors’ minds and have increased volatility,” said Mr Husain.

However, where there is volatility, there is opportunity, particularly for fixed income investors, said Mr Husain.

“The increase in volatility has seen, and will continue to see, opportunities being created in a number of different countries,” he said.